Business owners are required by the IRS to report amounts over $600 paid annually to certain individuals and business entities on Form 1099. The most common use of the Form W-9 is to gather the necessary information from these individuals/entities to process the required annual Forms 1099 – more specifically the complete legal name, address, taxpayer identification number, the federal classification of the payee and certification that the payee is exempt from backup withholding.
Why should you care about the W-9?
As a business owner there are two primary incidents where a completed Form W-9 is important to you.
Filing the required 1099s at the end of each year.
At the end of each year you are required to file a 1099 to report payments of at least $600 (in total) to persons (and some businesses) who are not your employees. Among other categories you must report payments for services performed, payments to attorneys and payments for rent. The Forms 1099 are due by January 31st each year. Having a completed Form W-9 already on file makes this process much smoother and helps you to avoid any penalties for late filing.
IRS notice of backup withholding
Most payees will be exempt from backup withholding. But if you hire an independent contractor who is not exempt then the IRS requires that you withhold income tax from the contractor’s payments and submit it to the IRS.
Implementing a best practice:
As a best practice consider implementing a routine of requesting new vendors to provide a completed Form W-9 before you process the first payment for services. The Form W-9 can be downloaded from the IRS website at https://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=103 or ask your accountant to help. Be sure to provide a copy of the completed W-9 to your tax preparer and keep the original in your files.
There is much focus today in the “small business owner” arena on protecting assets. What are the assets of a dental practice? There are lots! In fact dental offices are asset heavy as small businesses go. You’ve got your dental chairs, your x-ray machines, numerous hand tools, televisions, and computers, boxes of gauze and rubber gloves as well as oodles of other supplies, and the list goes on. If you operated a Best Buy, your inventory would be most at risk, which is why there are security detectors and staff stationed at the doors. But your patients and staff are not likely to walk out with either your dental chairs or your latex gloves. And why not? Well the big stuff would be tough to sneak out and there’s not a lot of money to be made on reselling gloves. So what do you have at risk?
Not physical cash in most cases because that is going the way of the dinosaur. But funds from your bank account, your credit card, even from your patients and insurance providers. It should start becoming clear who is most able to perpetrate these crimes…your administrative staff. “Not my staff!” you say. You treat them well, sometimes like family. They’re loyal to you, surely. And besides, you know what a thief looks like. They act shady, wear black, probably don’t shower. Your staff are professionals, often moms and grandmothers, and they do their jobs really well.
Yep…they’re the very ones. It’s like a dagger in your heart!
So what does an embezzler actually look like? Unfortunately they look like the model employee. They typically:
Arrive at work early and stay late
Are extremely well-liked by other staff and patients
Are one of the “family”
Never take vacations
Insist on handling everything him/herself
Almost 1 out of 6 dentists have been, will be or are being embezzled. We’ll be providing more information and tools you can implement to safeguard your practice in future blogs. Our advice for the moment: BE ALERT. Most dentists are just too busy or too content to notice the leak in their practice. If you suspect employee theft, don’t brush it off to paranoia. Those red flags may mean something.
Is your company PCI compliant? PCI was one of the hot 2016 acronyms and it isn’t going away. Not familiar? Its official name is “Payment Card Industry Data Security Standard.” Rolls right off the tongue, right? You know those fancy new credit cards with the computer chips? Those are the result of PCI compliance.
If you accept credit or debit cards as a form of payment from your patients, and who doesn’t these days, then PCI compliance applies to you. If you’re not PCI compliant, your merchant fees will be higher—an unnecessary added overhead cost (interpret—less money in your pocket). But even scarier, if you’re not PCI compliant and there is fraud or a breach in your patient’s data, you will be responsible…for covering those fraudulent charges, for any associated legal fees, for potential fines for the violation—expensive stuff. Is this a real worry? Will this really ever happen to you? Maybe not. After all you know all your patients, for the most part. You have good relationships with them. They’re not like the random customer at the register in Wal-Mart. But what about that next new patient that walks in the door?
Despite urgings by Visa, MasterCard, etc, despite the fact that companies continue to get hacked, most businesses have still not upgraded to the new technology. The reasons vary but the most common have little to do with cost and everything to do with time. You’re busy! Your current credit card machine is working fine so why go to the trouble of dealing with this now?
But if not now, when? Do yourself a favor and put it on your schedule to get it handled—like for a specific date and time, not just on your elusive To Do list. Or better yet, set someone responsible in your office to handle it and report back to you. This isn’t rocket science and doesn’t require your dental expertise. It just requires someone doing a bit of research and informing you so you can make an educated decision. And if you’re not happy with your current merchant provider or aren’t sure you’re getting the best rate or service—contact us. We know a vendor who will give you an honest rate assessment and help to ensure you are compliant.
At our Fall ADCPA (Academy of Dental CPAs) meeting we learned of the wonders of a new cavity treatment called silver diamine fluoride…SDF from one of our knowledgeable members. If you are a pediatric dentist you may already be in the know as this is touted as the latest and greatest thing for treating cavities in baby teeth. No drilling, no anesthesia, no pain. Just a drop is needed for the treatment, so although the service will not be a big ticket item, the margins are fabulous. Not to mention, parents will be ecstatic and tell their friends. But the uses could extend beyond children to the elderly and others, and even to adult molars hidden from view. Do your research. There are pros and cons. But definitely check it out!
“Now, personally, I like a car with some sort of character.” Richard Hammond
In any profession, it’s best to lead by example. If the car that you’ve had for years (you know – the trusty one that got you through dental school and has seen better days) is making you cringe instead of smile, it may be time to consider purchasing a new vehicle. If this sounds like you, and you are in the market for a new car, below are a few general tips and notes to help out.
Purchase or lease the vehicle under your personal name
Get the car insured in your personal name
Make the car payments with business funds
Pay for any auto-related expenses with business funds. This includes:
Maintenance & repairs
Gas & oil
Tolls & Parking
Keep a mileage log; this is the most accurate way to give your accountant the information needed to split the expenses into business-use miles and personal-use miles. Keeping track of actual miles is also an important way to provide hard evidence to the IRS in the case of an audit. Automobile expense is one of the items that the IRS is extremely particular about, so it is important to have this information available.
The good news regarding mileage is that the days of keeping a paper mileage log are long gone. There are several great apps available to help you easily keep track of miles, and are worth checking out. Here are a few suggestions.
Whether it’s your first employee or the addition of staff to facilitate the needs of your growing practice, you want to make sure that you have your new hire complete the correct documents that you are required to keep on file.
Each employee you hire is required to fill out these important government documents for you. To ensure completion of these documents, provide the forms to the new hire at the very start of employment and have them fill out the forms before they begin any work.
Form W-4 (Employee’s Withholding Certificate) – gathers basis payroll tax information and asks the employee how much federal income tax to withhold from their pay. https://www.irs.gov/pub/irs-pdf/fw4.pdf
Interesting items to note regarding Temporary Employees and the infamous “Working Interview”:
Temporary Employees that are hired directly by your practice are considered employees of the practice for all intents and purposes and are able to file unemployment claims once the work relationship has ended.
Consider hiring Temporary Employees through a temporary service. By doing so, the temporary service is the employer and they will handle any unemployment claims filed by these employees.
A “Working Interview” is considered to be an “interview” where the worker performs actual work for the company. This form of work for the company IS deemed “on the job” training or part of orientation to the company and IS viewed as work time. The worker expects to be compensated for this time and the company is expected to pay the worker at least a minimum wage for this time, obtain the required new-hire government documents (as listed above-Form I-9, Form W-4, etc.) and report the wages paid to the IRS and applicable State entities. The short story to this is….Working Interviews should be given a paycheck which is run through the company’s payroll system and has the appropriate payroll taxes withheld from it.
With elections around the corner, paying attention to the candidates’ tax plans is crucial. Clinton wants upper-income Americans to pay more, while Trump seeks across-the-board tax cuts. Per The Kiplinger Tax Letter, some highlights of both candidates’ plans are:
Raise in capital gains rates for individuals in the 39.6% bracket who sell assets they have owned for six years or less. Taking into account the 3.8% surtax on net investment income, these folks would pay tax at a 43.4% rate on gains from assets held two years or less. The rate would drop incrementally to 23.8% (the rate currently) for assets held more than six years.
Surcharge on taxpayers with AGIs over $5 million.
Payroll tax hikes by increasing the wage ceiling on the 6.2% Social Security tax.
Cap of 28% on the value of itemized deductions (except charitable contributions).
30% minimum tax on millionaires.
Restrictions on those taxpayers with large balances in their retirement plans or IRAs.
Doubling of the child tax credit to $2,000 for each child up to age four.
New caregiver credit of up to $1,200 to provide relief to people who help care for elderly parents or grandparents.
Reduce individual tax rates into three tax brackets: 12%, 25%, and 33%. For married couples, the 12% rate runs to $75,000, the 25% one tops out at $225,000 and the 33% rate kicks in after that. These thresholds are cut in half for single filers.
15% business rate.
Standard deductions would go up to $30,000 for joint filers and $15,000 for singles.
No more personal exemptions or head-of-household filing status.
Capital gains tax would stay as is.
Elimination of the 0.9% and 3.8% Affordable Care Act surtaxes.
Elimination of alternate minimum tax, as well as estate and gift tax.
Expansion of dependent care breaks for working and stay-at-home parents and creation of tax-favored savings accounts for child development and elder care expenses.
Itemization would be capped at $200,000 for couples and $100,000 for singles.
The most noticeable disagreement between the two candidates is over the Affordable Care Act (aka Obamacare):
Increase premium tax credits.
Refundable tax credit up to $2,500 to insured individuals, $5,000 for families for individuals whose out-of-pockets expenses exceed 5% of income.
Ditch the plan completely.
Give individuals an above-the-line deduction for premiums that they pay and not subjecting the write-offs to an adjusted-gross-income threshold.
Rely more on HSAs to help individuals pay for coverage
In the spirit of giving during the holiday season, Edwards & Associates, PC will be donating to charities that are important to us and to our valued clients. Won’t you join us and experience the gift of giving by donating to one of the following worthy causes:
During this Season of Thanksgiving, we at Edwards & Associates, PC want to acknowledge our clients for their patronage and referrals. We are sincerely appreciative and would like to take this opportunity to also wish all of you a wonderful, warm and Happy Thanksgiving with your families and loved ones.
Now that tax returns or extension applications are off to the IRS, increasing profits and managing overhead in today’s dental world of higher competition, lower dental insurance reimbursement and sluggish dental consumer spending is imperative. Here are some things to consider that can provide more money in your pocket by the end of this year.
Review your procedure mix on both a Macro and a Micro level. This takes a little number crunching. Run a 12-month production report of all of the procedures done categorized by ADA code and provider. Is your practice within the profitability ranges below?
Hygiene perio procedures total (those ADA codes in 4000) should be at least 30 percent of each hygienist’s total production (unless you are Pedo)
Dentist’s prosthodontic procedures need to be 50-75 percent of his/her production.
Increase Treatment Acceptance. Every year, you and your entire team should take a course or bring a trainer in to take your treatment acceptance up a notch or two. Increasing treatment acceptance of what you diagnose is a boost to profitability. Treatment acceptance processes and communication skills are NOT something you get in one or two courses. In fact, for the dental professional it requires a lifelong learning journey.
The COL (Cost of Living) percentage for this past year was only .8 percent (BLS CPI YE 2014). Most practices are going to a bonus system and doing away with automatic raises. Here is where your staff salaries as a percentage of your collections for the year should fall:
Dental General Practice Staff Overhead Model*
Business Salaries: 7-9%
Chairside Salaries: 7-9%
Hygiene Salaries: 4-9%
Increase new patient flow and patient retention. Truly look at your recall percentage and see if you have lost patients who are wandering around ripe for picking by other practices. Close any leaks in recall retention by looking deep into the administrative, customer service and clinical components of recall.
Know how many new patients you had, and then decide how many more you need to bring your profits up. Remember: New Patients ARE the lifeblood of your practice. Then, create a marketing plan with a professional who can help you increase the number of new patients.
If you want to develop your treatment presentation skills, call us to schedule a consultation with one of our practice management consultants.